A Flush Data Domain Raises Revenue Guidance

De-dupe specialist Data Domain shrugged off concerns about the economy last night, posting a strong set of first quarter results.

Much has been made of the perceived slowdown in IT spending,” said Data Domain CEO Frank Slootman, during a conference call last night, adding that he saw “nothing noteworthy” in the macroeconomic climate in January and February that might affect company performance.

The vendor did see some softness and “lackluster sentiment” in March, but Slootman is not exactly panicking. “It’s hard to know how much of it is from seasonality."

Data Domain’s first quarter revenues were $52.6 million, a massive 160 percent hike on the same period last year, and well above analyst estimates of $47.2 million.

On a GAAP basis, the vendor’s first quarter earnings were 4 cents per share on net income of $2.7 million, compared to a net loss of $1.5 million and 18 cents per share in the first quarter of 2007.Excluding stock-based compensation and taxes, Data Domain’s earnings were 12 cents per share on net income of $7.7 million, compared to losses of 5 cents and $363,000 in the year-ago quarter. Analysts had estimated a loss of 2 cents.

”We see the market developing faster and faster,” said Slootman, explaining that Data Domain will add another 54 employees to its 276-strong sales force in the second quarter. “We have told our VP of sales that if he finds the right people, ‘pull the trigger and hire them.'”

The CEO, whose firm only went public last year, also promised a set of “significant new products” during the second quarter, but was only prepared to discuss one of these.

”We have a new software release coming out this quarter, which will introduce some significant content for nearline applications,” he said.

The exec, whose firm competes with the likes of Quantum, ExaGrid, and Diligent (now part of IBM), faced a barrage of questions about the competitive landscape during last night’s call."In Q1 [competitors] were trying to discount very hard," he said. “We try to resist that -- there is no point for our customers to get a product for free that is not doing the job.”

With a flurry of activity going on in the de-dupe market, analysts were also keen to get Slootman’s take on the rumored de-dupe deal between EMC and Quantum.

”It’s not a well-kept secret anymore -- we expect them to make public announcements sometime next month,” replied the CEO. “It looks like Quantum software running on EMC hardware.”

The exec was also grilled on IBM’s acquisition of Diligent last week, which was rumored to be worth $200 million.

”It’s surely interesting to see a company like IBM deciding that they have to own the technology, instead of one of the OEM-type companies,” he said, referring to the likes of HP and Sun. “Maybe it’s time to transition from OEM to buying.”Data Domain also used last night’s conference call to raise its second quarter guidance to between $57 million and $59 million from its original range of $52 million to $54 million. The vendor also pushed its full year guidance up by $20 million to between $225 million and $235 million.

With de-duplication increasingly featuring in users' storage plans, the future looks relatively rosy for Data Domain, according to at least one analyst.

"We expect sales momentum to continue given Data Domain's competitive position in combination with broad end-market demand," wrote R.W. Baird analyst Jayson Noland, in a note released this morning. But he warned that rivals such as IBM and EMC will be cranking up their own de-dupe efforts. "As such, we believe Data Domain will be challenged to maintain majority share, though strong end-market growth, in our view, will drive revenue upside for the foreseeable future."

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